When the money men start to jerk your chain, you either come to heel, or bite back.
The last two days of my life have been consumed by an “urgent” application by a lender to install a receiver of a boat dealer.
As is always the case, these applications are brought on short notice, with very little time for the debtor to respond. This is often with good reason. Usually payments have not been made, stock is leaving out the back door, and the lender needs to act quick.
Sometimes, and this appears to be one of those cases, the lender has jumped the gun.
Oddly, my client is not in default of payments. It is current and up to date.
What the lender is alleging is a technical default by suggesting that payments made by customers before title has passed to the purchaser ought to have been handed over to it.
I won’t get into the technicalities, but much depends on the meaning of “sold”, a concept undefined in the loan agreement. Does title to the boat have to pass to the purchaser before it is considered sold?
What if, for any given circumstance, the transaction does not close? The customer will want its money back. If the dealer has already paid it over to the lender, how does the dealer get it back to refund the purchaser? Are those deemed trust funds? Would paying the money over to the lender put the retailer in a position of being in breach of trust?
All the legal niceties aside, the lender is exercising its considerable leverage, quite possibly prematurely. The debtor in these cases has to try to co-operate, which my client is. We have agreed to a short term measure, essentially allowing the lender to send in a “babysitter” so it can be satisfied its security isn’t going to disappear. On that basis, the court application has been adjourned for a week.
But the lender keeps on pushing for more onerous terms.
We may be at the point where the sand is drawn in the line.
To be continued……………